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Mike Dobson of TeleMapics on Local Search and All Things Geospatial

TeleAtlas And TomTom Together Forever?

May 24th, 2009 by MDob

A couple of days ago, in an article from Reuters, TeleAtlas Chief Executive Bill Henry said that splitting TomTom and TeleAtlas is not an option that the company has been considering and denied that they were in talks with anyone about this possibility.

Unfortunately, due to the problems with the world economy and a drop in demand in the PND market, TomTom (including TeleAtlas) is now worth approximately one-fifth of what it agreed to pay for TeleAtlas last year. Maybe Henry and TomTom’s management want to pretend that they are not thinking about this, but other investors are likely calculating when, not if.

The interview with Henry includes a lot of “market speak” – such as this gem – “I think the value is in the integrated group because this whole community is essential to the mapmaking process, and that community exists through the integration of TomTom and TeleAtlas. So I don’t think it makes any sense to look at them separately.” Huh? Whazat mean bro? I guess shareholders did not understand this either as share prices continued to drop after Henry’s remarks.

Let’s review the situation

TomTom acquired TeleAtlas because it fit their strategic plan for evolving TomTom into a content company that also could provide navigation software across a variety of platforms.

It is likely that the future value of TeleAtlas (presuming that the company is properly managed) will exceed that of the TomTom component of the business, at least that portion of the business focused on the PND market. While navigation databases will remain a required component of all navigation systems, it seems likely that PND production will be threatened by navigation functionality on mobile phones.

In the interview, Henry appears to believe that this is untrue and argues his belief that the PND market is a very solid category. That may be true, but if it is, why did Navigon recently drop out of the US market? Cut throat pricing, razor thin margins and increasing pricing pressure are three likely reasons and neither TomTom nor Garmin are exempt from these problems. Yes, the market will continue to exist, but the problem is whether anyone will make any profit from being a participant.

If TomTom does keep TA (and it will try to do so) the question becomes whether it can afford to invest in the company’s future and keep it competitive with Navteq. While TomTom’s use of MapShare is a bold initiative in this market, it is my belief that UGC should not yet be substituted for actual field research by professional map researchers. During a recent project, I was startled by the fact that Microsoft Live Maps and Yahoo Maps were more current in areas of New York City than Google Maps and this was the first time I had found Google to be the laggard in online mapping practices. I presumed that this has to do with the update cycles, but the differences could be an indication that TA, who is now Google’s main supplier, is starting to lag NT in coverage and accuracy, due to a lack of funding for field research.

It is my understanding that TomTom/TA has been selling off its fleet of instrumented vans. This is an unconfirmed rumor, but one that came from as close to the horse’s mouth as you can get. If true, it may indicate that TomTom is unwilling or unable to support TA’s in its attempt to challenge Navteq in data quality.

Finally, ADAS applications are beginning to emerge supported by data from Navteq and Intermap. TeleAtlas seems to be absent from this field. If TomTom/TA are waiting for this market to “heat up”, they will find themselves very far behind. However, it is unlikely that they have the money or determination to invest in this competition.

So, while TomTom may not want to part with TA, it is likely that their deteriorating market condition may not let them have the final say in this argument. After all, at today’s valuation, you could buy them and TA for a relatively modest price. The real issue here is whether or not today’s price is a bargain. I suspect that bargain basement price will be much lower.

(By the way, some of the team from Navigon and Cobra (a company that dropped out of the PND market last year) are now at Rand McNally in what seems to be a curious turn of events.)

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Posted in Mapping, Navteq, Personal Navigation, routing and navigation, TeleAtlas, TomTom

2 Responses

  1. adasdude

    TA did sell off fleet of data collection vans and laid off the crews in favor of a community collection approach.

    Thanks! Mike

  2. Jimmy

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    We have recently started our new business and we require to buy Car navigation system or Tom Toms for our taxis . Can anyone suggest which type of navigation system and company is the best and where we can get the best deals.

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    Thank you